Earnings divergence between AI and non-AI PCB manufacturers may continue to widen

Overview

This report focuses on China's PCB/CCL industry chain. Its core view is that earnings performance will continue to diverge between AI and non-AI PCB manufacturers. AI infrastructure construction is sustaining strong demand for high-end PCBs, and AI PCB manufacturers are more likely to pass through costs smoothly even amid price increases for certain high-end materials. In contrast, traditional non-AI PCB manufacturers face earnings pressure from tight upstream material supply, sharply higher traditional material prices and weak downstream demand.

Core views

The report believes that the earnings advantage of AI PCB manufacturers over non-AI manufacturers may widen further over the next several quarters. For traditional materials, prices of the 7628 series have risen approximately 1.2 times since the end of 3Q25, while FR-4 quotations have increased approximately 1.3 times over the same period, with non-AI PCB manufacturers bearing most of the cost pressure. For high-end materials, high-speed CCL (>=M4) prices have increased approximately 10%-40% year to date, with limited increases for certain major customers, so the risk of cost erosion for AI PCB manufacturers is relatively low.

Analysis framework

The report compares 1Q26 data from Chinese-listed PCB companies, excluding long-tail companies with market capitalizations below RMB10 billion and DSBJ due to the impact of asset consolidation on earnings comparability, to assess differences in profit growth between AI-related and other manufacturers. It also incorporates companies that have released second-quarter earnings forecasts, including Founder, Delton, Sunshine, Olympic and Bomin, to validate the earnings divergence trend.

Methodology notes

• Industry comparisonAnalysis of earnings divergence between AI and non-AI PCBs

  Distinguishing PCB manufacturers by exposure to AI-related applications such as AI servers, high-speed switches, optical modules and IC substrates

  This framework divides companies into AI-related and non-AI-related categories and compares demand strength, material cost pass-through capability and profit growth trends to assess the direction of earnings divergence.

• Cost pass-throughAnalysis of material price increases and price pass-through

  Differences in price increases for traditional and high-end materials and downstream bargaining power

  The report compares price changes for traditional materials such as 7628 and FR-4 with those for high-end materials such as high-speed CCL (>=M4), concluding that traditional PCB manufacturers have greater difficulty passing costs on to end customers, while AI PCB manufacturers have smoother pass-through.

• Earnings validationCross-validation of first-quarter financial data and second-quarter forecasts

  Using disclosed earnings forecasts to validate industry trends

  The report combines first-quarter financial performance with preliminary second-quarter earnings announcements and concludes that accelerating profit growth at Founder and Delton reinforces the view of stronger AI PCB industry conditions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Avary Holding (Shenzhen) Co., Ltd. (002938 CH)

  PCB company mentioned in the report, with a disclosed BUY rating

  Strengths

  Has some AI-related exposure and is included in the discussion of relevant companies.

  Weaknesses

  The report notes that its current AI exposure is limited, making it one of the exceptions in terms of profit performance.

  Comparison

  Compared with more direct AI PCB beneficiaries such as Founder and Delton, its AI-driven earnings sensitivity may be weaker.

  Risks

  Earnings may come under pressure if traditional material prices continue to rise and cost pass-through remains difficult.

• Delton Technology (Guangzhou) Inc. (001389 CH / 1989 HK)

  AI-related PCB company mentioned in the report, with disclosed BUY ratings for its A-share and Hong Kong-listed shares

  Strengths

  Has high exposure to the server market, and preliminary second-quarter results show accelerating profit growth.

  Weaknesses

  Still faces tight supply and price-increase risks for certain high-end materials.

  Comparison

  Compared with non-AI PCB manufacturers, Delton benefits more from AI infrastructure demand and has smoother cost pass-through.

  Risks

  Profit growth may fall below expectations if AI server demand slows or customers exert pricing pressure.

• WUS Printed Circuit (002463 CH)

  PCB company mentioned in the report, with a disclosed BUY rating

  Strengths

  Is related to the AI-related PCB theme and may benefit from demand for high-end PCBs.

  Weaknesses

  The report summary does not disclose its specific second-quarter performance.

  Comparison

  It is positioned in the AI/high-end PCB direction favored by the report, but its individual-stock sensitivity requires validation through actual orders and customer mix.

  Risks

  Shortages of high-end materials, rising costs and industry competition may affect margins.

• Founder

  Beneficiary of the AI server supply chain mentioned in the report

  Strengths

  Has entered the US and Chinese AI server supply chains, with accelerating second-quarter profit growth.

  Weaknesses

  The report does not provide complete valuation or target price information.

  Comparison

  Forms a sharp contrast with companies such as Sunshine, Olympic and Bomin, whose earnings are deteriorating.

  Risks

  Fluctuations in AI server supply chain orders may affect earnings sustainability.

• Non-AI PCB manufacturers

  Negative comparison group in the report

  Strengths

  Some manufacturers may pass through part of their costs downstream through advance order pull-ins and material price increases.

  Weaknesses

  Their ability to pass through prices is weak due to surging traditional material costs, weak end-market demand and low industry concentration.

  Comparison

  Compared with AI PCB manufacturers, non-AI manufacturers are expected to continue lagging in earnings performance.

  Risks

  Margins may decline further if traditional material prices continue to rise.

Key data

• 7628 series price changeIncreased approximately 1.2 timesSince the end of 3Q25, prices of the 7628 series, a typical E-glass cloth, have risen sharply.
• FR-4 quotation changeIncreased approximately 1.3 timesKingboard indicated that it raised quotations for the most commonly used CCL FR-4 by approximately 1.3 times over the same period.
• High-speed CCL price increase10%-40%Major suppliers have implemented relatively restrained price increases for high-speed CCL (>=M4) year to date.
• Representative AI PCB earnings signalAccelerating second-quarter profit growth at Founder and DeltonThe report believes this reflects strong demand and limited cost impact.
• Non-AI PCB pressure signalContinued earnings deterioration at Sunshine, Olympic and BominThe report views this as evidence that traditional or non-AI-related manufacturers are under pressure.
• Jefferies Buy definition12-month total return of 15% or moreThe report discloses the meaning of Buy in Jefferies' rating system.

Impact & implications

For investors, portfolio allocation within the PCB industry chain may continue to tilt toward companies with high exposure to AI servers, high-speed switches, optical modules and IC substrates. Even if non-AI PCB manufacturers attempt to raise prices, they may lose sales because of low industry concentration and weak end-market demand, resulting in relatively weaker earnings sensitivity and valuation support.

Risks

• Continued increases in traditional material prices may further compress the profits of non-AI PCB manufacturers.
• Severe shortages of high-end materials such as low-Dk/CTE glass fiber may create additional cost pressure.
• Weak end-market demand may make it difficult for non-AI PCB manufacturers to pass costs through via price increases.
• If AI infrastructure demand falls short of expectations, the earnings advantage of AI PCB manufacturers may weaken.
• Foreign exchange, macroeconomic, financial and political factors may affect security prices and investment returns.

What to watch

• Whether upcoming second-quarter results from the remaining PCB companies continue to validate the earnings divergence between AI and non-AI players.
• The duration and magnitude of price increases for traditional materials such as 7628 and FR-4.
• The severity of supply constraints for high-end materials such as high-speed CCL (>=M4) and low-Dk/CTE glass fiber.
• Whether order demand for AI servers, high-speed switches, optical modules and IC substrates remains strong.
• The impact on sales volumes when PCB manufacturers pass costs on to end customers.